SEC Chair Nominee Jay Clayton Looks Forward To Incentivize Activists

The nominee to replace Mary Jo White as chair of the Securities and Exchange Commission (SEC) faced a grilling by the U.S. Senate banking committee yesterday in which activism played a major role. Questioned directly about whether the SEC under his leadership would seek to help or hinder activists, including by reforming disclosure rules, Jay Clayton said the benefit or otherwise of activist investors was “going to be an ongoing debate, I understand the contours of it, and I look forward to working on it.” He followed up by saying that he wanted to incentivize activists but also ensure that they don’t have an “unfair advantage.”

SEC

A more interesting exchange between Clayton and Senator Elizabeth Warren focused on Carl Icahn, the regulatory adviser to the president who has been accused of having a conflict of interest in the role thanks to his large investment holdings. Clayton confirmed that he had met Icahn after he was nominated, effectively ruling out the suggestion he had been interviewed for the role, and said they discussed “Mr Icahn’s view on the importance of activist investors and how they through their methods drive performance of public companies.” He refused, however, to be drawn by Warren on whether Icahn’s investment in Bristol-Myers Squibb was a violation of securities law, given Icahn’s closeness to the administration, or another senator’s question as to whether Pershing Square Capital Management’s 2014 campaign at Allergan was insider trading, the subject of an ongoing class action lawsuit.

So far, so unrevealing. One thing we do know about Clayton is that he intends to make the U.S. a more attractive place for companies to go public, saying in his opening statement: “It is clear that our public capital markets are less attractive to business than in the past. As a result, investment opportunities for Main Street investors are more limited. Here, I see meaningful room for improvement.”